Changes in Self-Employed Contributions and Their Link to the Personal Income Tax (IRPF) In Spain
Social SecurityTax Agency (Hacienda)
As you may already know, starting from January 1, 2023, there were significant changes in the self-employed contributions in Spain. Self-employed workers now contribute to Social Security under a new quota system. These modifications are directly linked to the expected annual income declared in the Personal Income Tax (IRPF).
In this article, we will analyze the key aspects of this new contribution system, including the contribution base, the regularization of contributions, and the criteria for imputation in the IRPF.
Contribution base in 2023
The contribution base for self-employed individuals from 2023 is closely tied to the net income they expect to earn throughout the year. This novelty implies that monthly contributions for self-employed workers will vary depending on how these incomes evolve during the fiscal year. Additionally, a generic expense deduction of 7% is allowed on the calculated incomes.
This flexibility can be beneficial for self-employed individuals as it allows them to adjust their contributions to their actual income expectations. However, it also creates uncertainty about how much they will have to contribute, given that income fluctuations can be challenging to predict accurately.
Regularization of self-employed contributions in the following year
One of the most significant changes is that the Social Security contributions of self-employed workers are regularized in the following year after the corresponding IRPF declaration for the previous year has been filed. This means that the contributions made during the year are based on estimates, and any differences between these estimates and actual incomes are adjusted afterward.
If the expected incomes differ from the actual incomes declared in the IRPF, the Social Security will carry out a regularization. If the self-employed worker reported lower incomes than the final ones and contributed less, they will be required to pay the pending Social Security contributions. On the other hand, if the expected incomes were higher, and they over-contributed, they will receive a refund of the difference.
Criteria for imputation in the IRPF
A relevant question arises in this context: how should self-employed individuals act when the Social Security notifies them of the regularization? Should they amend the previous year’s IRPF declaration or can they impute these differences in the year of the final settlement?
According to the accrual basis
According to the accrual criterion, which is applied to recognize the income from an economic activity, the differences resulting from regularization should be imputed to the initial fiscal year and not to the year of regularization.
This means that if in 2024 a higher contribution amount is determined, the self-employed worker should file an amendment to the 2023 IRPF, seeking a refund of the excess paid. Conversely, if an amount is to be refunded by the Social Security, they should file a supplementary return for the 2023 IRPF, as the contribution expense is lower, leading to higher income taxation.
According to the Tax Agency
However, the Tax Agency has established that neither supplementary nor amended returns will be necessary [DGT V2518-22]. According to this criterion, the expense deducted in 2023 based on the provisional contribution is not considered incorrectly satisfied and does not require adjustment.
Instead, if in 2024 the self-employed worker has to pay an additional amount, it should be declared as an increased expense for that year. If the amount is to be refunded, it will be a reduction of the expense for 2024.
In exceptional cases where the amount to be refunded exceeds the contributions for the year 2024, the excess will be considered additional income from the economic activity.
To conclude, the amounts resulting from the regularization of contributions in 2023, based on the definitive net incomes, should be imputed in the IRPF for 2024 and not in the 2023 declaration, following the guidelines set by the Tax Agency.
These changes represent a new approach to self-employed contributions in Spain and require a precise understanding to avoid tax surprises in the future.
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